Medtronic Beats Estimates, Provides Solid Guidance

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Medical device maker Medtronic PLC (NYSE: MDT) reported fourth-quarter and fiscal-year 2016 results before U.S. markets opened Tuesday. The Dublin, Ireland-based company posted quarterly adjusted diluted earnings per share (EPS) of $1.27 on $7.6 billion in sales. In the same period a year ago, the company reported EPS of $1.16 on sales of $7.3 billion. Fourth-quarter results also compare to the Thomson Reuters consensus estimates for EPS of $1.26 and $7.49 billion in revenue.

For the full year, Medtronic reported EPS of $4.37 and revenues of $28.83 billion, compared with fiscal 2015 EPS of $4.28 and revenues of $20.26 billion. Analysts had been looking for EPS of $4.37 and revenues of $28.73 billion.

On a constant currency basis, fourth-quarter EPS totaled $1.37 and full-year EPS totaled $4.84.

Chairman and CEO Omar Ishrak said:

This quarter caps a transformative year for Medtronic, our first full year after closing the largest ever MedTech acquisition. I am pleased with the execution and focus of our teams around the world who delivered sustained revenue growth and exceeded our Covidien cost synergy commitments. …

As we enter our new fiscal year, we look forward to delivering on our robust pipeline of products and services, expanding our global reach to serve more patients, and partnering with others around the world to develop new value-based business models.

For fiscal 2017, Medtronic expects to grow revenues 5% to 6% on a constant currency basis, excluding the impact of an extra week in the first quarter of 2016.  The company expects adjusted diluted EPS in the range of $4.60 to $4.70, including an expected $0.20 to $0.25 negative foreign currency impact based on current exchange rates. This guidance implies diluted EPS growth in the range of 12% to 16% after adjusting for the estimated impact of foreign currency translation and the extra selling week in the company`s first quarter of fiscal year 2016.

Analysts had estimated 2017 EPS at $4.70 and revenues at $29.65 billion. The low-end of Medtronic’s revenue guidance is nearly $30.3 billion.

No word yet on a dividend hike, but In June of 2015, a dividend hike took the payout ratio to approximately 35%, with a 40% goal in the coming years. It also marked the 38th consecutive year of dividend hikes. Based on this, we might expect another dividend hike relatively soon.

Medtronic stock closed last Friday at $81.69, up about 0.6% for the day in a 52-week range of $55.54 to $82.00. Shares were up fractionally in Tuesday’s premarket. The consensus price target on the stock is $85.19, and the high target is $94.